More than other age groups, people over the age of 65 are reluctant to consider changes in their insurance needs, according to a national survey of homeowners by Trusted Choice and the Independent Insurance Agents & Brokers of America.
Overall, nearly 24 percent of Americans have made changes to their auto, home, life, or health insurance coverage in the past year in order to reduce costs; 18 percent have considered such changes in the past few months; and 33 percent would consider insurance cutbacks in 2009. The overwhelming reason for the reductions is the sorry state of the economy.
Compared with those overall responses, however, older consumers were less likely across the board to make reductions. Only 9 percent of respondents ages 65 and older had made insurance reductions in the past year; 12 percent had considered them recently; and only 10 percent said they would consider them in 2009.
According to the 2007 survey of consumer household expenditures by the U.S. Labor Department, average after-tax income of households led by people ages 65 and higher was about $39,180. Of this amount, health insurance spending averaged $2,770, car insurance cost $975, and $329 was spent on life insurance and other types of personal insurance.
There was no breakout for home insurance, but even without that expense, average insurance payments were about $4,700, or more than 10 percent of after-tax income. By comparison, annual household spending on food—including food at home and meals away from home—was only $4,515.
So, while older consumers might be reluctant to reduce their spending on insurance, they should think about whether some wise trims can be made without sacrificing their key insurance safeguards. Here are tips for where to look for auto, home, life, and health insurance savings:
1) Many seniors have older vehicles and do not need expensive low-dollar deductibles for collision and comprehensive coverage. Consider selecting higher deductibles. However, do not scrimp on liability protection or uninsured motorist coverage. More people are dropping their car insurance because of the tough economy, so you need to make sure you're covered should you be in an accident with an uninsured driver.
2) Some insurers have responded to last summer's $4 gasoline by expanding their reduced-driving discounts to better serve people who have cut back on their driving. If you do not drive many miles, you may qualify.
3) When you rent a car, odds are you do not need rental-car insurance and can rely on your existing car insurance policy to protect you. You will, however, be on the hook for the deductible payment should you be in an accident that is your fault.
4) Inflation protection is a must-keep feature of home insurance, but like millions of seniors who have downsized, you may have reduced your possessions. Review whether you still need special riders on jewelry, furs, computers, and other items.
5) Life insurance is designed to help loved ones, providing them money to replace the income lost by your death and helping to conserve assets in your estate should you have enough wealth to trigger estate taxes. As we age, the protective objectives of life insurance diminish and you may not need as large a policy.
6) Substitute generics for brand-name drugs. The U.S. Food and Drug Administration has a tool to identify generic equivalents of brand-name prescription drugs. Use it and see if you can save money.